Over the last three years, its profit before tax (PBT) has grown to a new record of RM6.49 billion in the financial year ended Dec 31, 2015 (FY2015) from RM5.05 billion in FY2012 — translating into an 8.75% compounded annual growth rate. This is slightly below that of some finance stocks, but is the highest among its peers with at least RM40 billion market capitalisation in the Super Big Cap category.

In FY2015, while most banks saw margins slide and profit growth decline amid an increasingly tough macroeconomic environment and competitive banking landscape, Public Bank managed to post commendable PBT growth of 11.6% over the previous year, surpassing the RM6 billion mark for the first time. Net profit grew to RM5.06 billion from RM4.42 billion the year before.

Its net return on equity, while having come down from above-20% levels since FY2014, stood at 17.8% in FY2015 — still the highest in the industry. Also, its cost-to-income ratio, despite having inched up to 30.5% in FY2015 from 30% the year before, remains the best.

It also remains unrivalled in asset quality, with its gross impaired loan ratio having come down consistently over the years to just 0.5% in FY2015 — a testament to its founder and chairman Tan Sri Teh Hong Piow’s belief in running the bank prudently.

But there are signs of the strong growth seen in earlier years tapering as the challenging times continue.

Its 1H2016 net profit of RM2.49 billion represented a slower year-on-year growth of 5% compared with 14.2% in 1H2015. This came amid lower income and slightly higher operating expenditure.

Public Bank’s loans grew 9.5% y-o-y while deposits expanded 5.5%, trumping the industry’s average growth of 6.2% and -1.1% respectively. However, the pace was slower than that in 1H2015, when both loans and deposits grew more than 11%.

Its 1H2016 performance was nevertheless within analysts’ expectations. Most continue to like the stock as they see the group continuing to outperform its peers.

On July 27, Public Bank trimmed its base rate and base lending rate by 23 basis points to 3.52% and 6.72% respectively, after Bank Negara Malaysia lowered the overnight policy rate (OPR) by 25 basis points to 3%. This is likely to weigh on its net interest margin (NIM) over the next few quarters.

“Management maintains that 2H2016 will be challenging. Loan growth is expected to be slower as the pipeline of loan approvals moderated, for 1H2016 loan approvals contracted by 20% y-o-y. Management expects deposits to have a flattish momentum with the cost of funds temporarily receding, abetted by a suspension of deposit-taking due to the cut in OPR. However, management fears that a new round of deposit-taking campaign could come sooner than expected,” Kenanga Investment Bank Research says in a July 29 report.

Prior to the OPR cut in July, Public Bank raised its base rate by 10 basis points in May on account of higher funding costs. As such, analysts feel the bank should be able to weather NIM compression better than most peers.

AllianceDBS Research is one of several research houses that has Public Bank as their top pick in the banking sector. “Despite the domestic macro headwinds, we expect Public Bank to continue to deliver above-industry growth and [have a] dominant market share in the mortgage, automotive and SME segments. Contributions from the unit trust business will continue to differentiate it from its peers,” it says.